Revamped cohesion policy agreed after one year of negotiations

After more than a year of negotiations with the Commission and EU ministers, a Parliament committee has agreed a deal on the EU’s cohesion policy for 2014-2020, paving the way for the €325 billion investment tool for the EU's poor regions to come into force in time, before the end of the year.

The regional development committee endorsed yesterday (7 November) the deal struck with EU member states on the reform of key regulation covering all EU funds. This clears the last hurdle before the deal goes to the entire Parliament for a vote in plenary, possibly during the 18-21 November session.

"These funds deliver major investment in times of the economic crisis," said MEP Danuta Hübner (EPP, Poland), chair of the regional development committee. Hübner had also chaired on behalf of the Parliament all the negotiation meetings with the Council from 2012.

The former EU regional policy commissioner added that the EU institutions had been able to agree to a reform of EU regional policy that focused investment on key areas for growth.

Less developed regions (see map) are priority recipients of cohesion funds. Almost the entire territory of Poland and the South of Italy are considered less developed regions. The entire territories of Bulgaria, Croatia, Estonia, Latvia, Lithuania, Portugal, as well as the majority of the territories of the Czech Republic, Hungary, Romania, Slovakia, Hungary and Greece are considered less developed regions.

From the older EU members states, except southern Italy, westernmost territories of the UK are also considered less developed regions.

Regional Policy Commissioner Johannes Hahn called the agreement “a major step forward in equipping the EU to support Europe's real economy”. He also stressed that that the original Commission proposal had been largely kept intact by the Council and the Parliament, even after 70 "trilogue" sessions between the three institutions.

Conditions introduced for first time

Hahn said that the reformed cohesion policy introduces three new elements to make it more effective and oriented towards clear results.

Indeed, firstly, priority is given to funding of projects concerning research and development, innovation, SME support, energy efficiency and renewable energies, poverty reduction, the fight against unemployment and job creation.

Secondly, member countries will have to spell out clearly what objectives they want to achieve with the available funding and they will have to identify exactly how to measure progress towards those aims.

The third key element is that the EU plans to introduce for the first time conditions that member countries and regions must meet before they receive the funds. The mechanism can trigger the suspension of funds in the event of a macroeconomic imbalance or an excessive budget deficit.

The Parliament’s negotiating team claimed that it had won an important concession on the issue, so-called macroeconomic conditionalities. Accordingly, Parliament will in the future be able to exercise its right of scrutiny over all decision-making procedures affecting the suspension of funds in a structured dialogue with the Commission. In addition, the suspension of funds will be adjusted in line with the social and economic circumstances of the member state concerned.

Hahn said that the Parliament’s vote cleared the way for member states and regions to prepare for the new strategies and programmes, which will mobilise the €325 billion of EU resources. The total reaches more than €500 billion when the national contributions of member states are taken into account.

"We were a lonely sailor in the ocean; we were the only institution fighting for years against the macroeconomic conditionalities. Not one member state in the Council – nor the Commission – has ever supported the European Parliament's position, and we have here a huge success, with the opinion of the EP having to be taken into account, and all safeguards introduced in the mechanism," said Hübner.

MEPs also succeeded in raising annual pre-financing rates which will provide regions with sufficient resources to kick-start investment and hence contribute to the efforts to overcome the economic crisis. In addition, co-financing rates for the EU's outermost regions, and for Cyprus were increased from 50% to 85%.

Furthermore, the negotiating team succeeded in reducing the size of the so-called performance reserve, resulting in an increase in the overall level of payments for 2014-2020 by more than €1 billion.

Positions

Lambert van Nistelrooij (EPP, the Netherlands), co-rapporteur for the common provisions regulation, said: "This will open the door to more ‘Made in Europe’. Our investment funds will focus on Smart Specialisation, targeted to cooperation between partners in developed and less developed regions throughout Europe".

Constanze Krehl (S&D, Germany), co-rapporteur for the common provisions regulation, said: "After long and tough negotiations, we can finally go one step further towards letting the new Cohesion Policy finally work! Even with the most difficult element to find an agreement on, macro-economic conditionality, we have fought for a compromise that will make it impossible for this mechanism to ever be applied in practice".

Background

Cohesion policy is the EU's main common investment policy tool.

Often referred to as regional policy, it provides vital basic financial support for investing in regions of the EU, thus helping to create jobs and boost economic growth. It accounts for a substantial share - about a third - of the EU budget: €347 billion in 2007-2013, or almost €50 billion per year.

For 2014-2020, the EU member states have reduced this budget to just over €325 billion.

Cohesion policy's ultimate aim is to reduce disparities between the levels of development of the various regions and the backwardness of the least-favoured regions or islands, including rural areas.

Timeline

18-21 Nov.: The new cohesion policy is scheduled for a first-reading vote in plenary in Strasbourg

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Will the Cohesion Policy reform include social policies for various services for people with disabilities, aging people, social housing, education which all are creating opportunities for massive and sustainable jobs: such jobs will in turn foster deman and help reducing deficits via higher tax recovery. Current deficits are mainly the result of unemployment… In addition jobs in social services aren’t easily subject to delocalisations nor to robotic replacement of workers, unlike industrial jobs or jobs in the distribution industries.